LONDON: Britain's pound will trade around current levels three months from now before beginning to strengthen towards the end of the year as economies wrecked by the coronavirus pandemic return to some form of normal, a Reuters poll found. The pandemic has wreaked havoc across markets after governments around the world imposed strict lockdowns, virtually shutting their economies. Britain faces the additional headache of negotiating a trade deal with the European Union, which London insists must be completed by the end of the year. As the virus spread and the death toll mounted, sterling had a torrid March, sinking to its lowest level in 35 years, before recovering some ground last month as investors grew hungry for riskier assets than the safe-haven dollar. In the May 4-6 poll of 60 foreign exchange strategists, sterling was expected to be near where it was trading on Wednesday at $1.24 in three months, strengthen to $1.26 in six months and be up about 5% at almost $1.30 in a year. Those median predictions were slightly stronger than in April's poll, in which forecasters slashed their outlook. But highlighting just how uncertain things still are, the 12-month forecast range was wide, from $1.20 to $1.41. "We continue to see downside risks for the pound given the severity of the COVID-19 impact looks to be greater in the UK than elsewhere," Derek Halpenny at MUFG said. Britain has the second-highest death toll in the world, lagging only the United States. The Bank of England will attempt later on Thursday to quantify the economic impact of lockdown measures and decide whether to loosen policy further, having already cut Bank Rate to a record low of 0.1% and resumed quantitative easing. No further loosening is expected on Thursday. "The focus will be more on Prime Minister Boris Johnson's phased approach to reopening the economy. This might be a mild GBP positive as it would set a roadmap towards some partial normalisation," ING told clients. "Still, upside to GBP/USD should be fairly limited." Johnson is expected to announce the government's next steps on Sunday. Britain is in the midst of its deepest downturn in peacetime, a Reuters poll of economists found last month, and an expected recovery in the second half is already in jeopardy. In the meantime, Britain's transition period with the European Union is due to expire at the end of December, and despite the coronavirus outbreak Britain has said it would not ask for an extension, even though it has the option to do so and scant progress has been made so far. That gives negotiators little time to come to an agreement, although Reuters polls of economists taken before the coronavirus hit said the two sides would agree a goods-only trade deal. Most of Britain's economy is made up of services. When Brexit talks were renewed in late April, they quickly hit snags, according to Brussels diplomats and officials who put the blame only partly on the coronavirus pandemic. Irish Foreign Minister Simon Coveney warned on Tuesday the talks would hit a crisis point unless there is progress in the coming weeks. "Brexit risks could amplify moves in GBP," noted Jane Foley at Rabobank. Foley, who was the most accurate foreign exchange forecaster of major currencies in Reuters polls in both 2018 and 2019, sees cable at $1.33 in a year. Against the common currency, the pound will barely move over the coming year. In one month, one euro will get you 88 pence, as it will in six months, the poll forecast. In a year, one euro will be worth 87p.
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